Gain a Better Understanding of Your Affordable Housing ...

Gain a Better Understanding of Your Affordable Housing Financial Statements ? The Basics

Presented by: Chris Bailey, CPA Robert Kitchen, CPA

About Clark Schaefer Hackett

Top 60 CPA firm with more than 75 years of history

More than 400 employees in 7 locations 75 professionals focusing solely on

Affordable Housing 30 years of firm experience in Affordable

Housing Serving more than 1,300 clients across the

industry

Learning Objectives

General overview of how to read and interpret affordable housing financial statements Background information as to why this information is needed Overview of the components of the financial statements Ways to analyze and extract information from the financial statements

Background ? Unique Real Estate Accounting

Net Income is not the overriding benchmark Net Operating Income and Cash Flow are the main

benchmarks Focus on asset appreciation Tax minimization (pass through entities)

Background ? Unique Real Estate Accounting

Unclassified balance sheet presentation Assets and liabilities on the balance sheet are not broken down b/w current (less than one year) and long-term

Some internal statements will disclose the expected fair value of the rental property

Background ? The Legal Entity

Most real estate financial statements represents the activity of a single project Real estate projects often have different ownership structures within a controlled group Helps limit legal issues from affecting an entire real estate portfolio

Most real estate projects are set up as pass through legal entities ? (limited liability companies or limited partnerships)

The legal entity will impact how the financial statements are prepared and presented C-corporations (except for nonprofits) are not preferred due to the additional layer of tax

Background ? Trusting the Numbers

The financial statements will often be accompanied by a report from an outside auditor

An audit is the process of verification that the financial statements can be relied upon as having been fairly presented

Be aware of qualifications in the report "except for" "subject to" that may indicate issues that the auditor found during the audit that was not corrected by management

Review (less assurance than an audit) Compilation (no assurance provided) Monthly statements are often prepared internally by

management and may not include all accruals which are often done at year-end

Background ? Audit Opinions

Unmodified or clean opinion

Qualified opinion

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